Where to buy in Brisbane - 2br townhouse within 10km under $350k

[bettedavis]

Hi All

I am shopping around for my first IP. My budget is between 300k-350k and looking for a 2br townhouse within 10km from CBD.

At the moment, I am focusing on +ve cashflow rather than high CG.

I also found a few 3br townhouses in Wynnum around $300k. Any opinion on the surburb? I am afraid that transportation may not be as good as North or Southside.

Any advice will be appreciated.

 

[redsquash]

Positive cash flow is easy.
Just put down a massive deposit.
Or
350k .8 = 280,000 loan
[email protected]% =$18200 year interest only repayment
plus expenses of 30% of interest( rates, insurance PM fees , maybe land tax ,repairs,vacancy rate, bad debt, bank fees etc) as a guide ( $5460)

$18200 + $5460= $23660 expense or a weekly rental of $455 a week

Assume tax rate is 30% then
30% x (5460 +18200) is $7098

7098/52 is $136 a week returned via the tax system
$455 a week- $136 a week is $319
So you need a rental of $319 a week or more to have positive cash flow.

Depreciation isn't included as this is calculated back in to the sale when it occurs . if you never sell then count it as a deduction

 

[vbplease]

$18200 + $5460= $23660 expense or a weekly rental of $455 a week

Assume tax rate is 30% then
30% x (5460 +18200) is $7098

7098/52 is $136 a week returned via the tax system

Are you sure about that? All expenses are a direct tax deduction??

From what I understand your net "paper" loss (including depreciation) is used to calculate your tax return from neg gearing. So for a total expense of $23,660 and rental income of 52 x 319 = $7,072 loss.. lets guess $5k depreciation, so a paper loss of $7,072 + $5k = $12,072
A tax return of $12,072 x 30% = $3,621
So your real loss is $7,072 - $3,621 = $3,451

You'd actually need a return closer to $400/wk (80% LVR) to be cf+

Back to the topic.. you may want to engage a BA who has his/her fingers on the pulse.. unless you want to do a lot of research/networking/searching/negotiating yourself.. Just having a quick look on re.com this Holland Park West is a 5.6% yield.

Just outside the 10km radius on the other hand...

 

[Roachy]

Stafford Heights, Mt Gravatt....those two come to mind, but to be honest I havent been looking for townhouses.

 

[Sailesh Channan]

Positive cash flow is easy.
Just put down a massive deposit.
Or
350k .8 = 280,000 loan
[email protected]% =$18200 year interest only repayment
plus expenses of 30% of interest( rates, insurance PM fees , maybe land tax ,repairs,vacancy rate, bad debt, bank fees etc) as a guide ( $5460)

$18200 + $5460= $23660 expense or a weekly rental of $455 a week

Assume tax rate is 30% then
30% x (5460 +18200) is $7098

7098/52 is $136 a week returned via the tax system
$455 a week- $136 a week is $319
So you need a rental of $319 a week or more to have positive cash flow.

Depreciation isn't included as this is calculated back in to the sale when it occurs . if you never sell then count it as a deduction

Most people purchase property with borrowed funds. Even the deposit is funded from redrawing equity from other properties. You also need to consider purchase costs when buying a property as well. Therefore in reality a property costing $350k could actually cost you over $365k.

Therefore, the cashflow for the new purchase needs to be calculated on this basis.

You may need to target areas that have not seen a lot of growth in recent times. You may also need to stretch out your suburb criteria a bit as well. Carseldine, is a good area to investigate as well..

 

[start-up]

Are you sure about that? All expenses are a direct tax deduction??

From what I understand your net "paper" loss (including depreciation) is used to calculate your tax return from neg gearing. So for a total expense of $23,660 and rental income of 52 x 319 = $7,072 loss.. lets guess $5k depreciation, so a paper loss of $7,072 + $5k = $12,072
A tax return of $12,072 x 30% = $3,621
So your real loss is $7,072 - $3,621 = $3,451

You'd actually need a return closer to $400/wk (80% LVR) to be cf+

Back to the topic.. you may want to engage a BA who has his/her fingers on the pulse.. unless you want to do a lot of research/networking/searching/negotiating yourself.. Just having a quick look on re.com this Holland Park West is a 5.6% yield.

Just outside the 10km radius on the other hand...

Sorry to drag the thread back off topic but can someone please clarify the difference between redsquash and VB's calculations.. and mention which one's correct? I'm trying to get my head around it but.. fail.

 

[vbplease]

Hey Start-up, check out this example and explanation from API magazine.. although their labelling of the rows makes it a little confusing! Rent income is one row, and tax refund cheques is another row

 

[bettedavis]

Sorry to drag the thread back off topic but can someone please clarify the difference between redsquash and VB's calculations.. and mention which one's correct? I'm trying to get my head around it but.. fail.

I didn't see the calculations in detail but looks like the bottom line is only net loss you made is tax deductible not gross rental expense (as in redsquash's) because you have to pay tax on rental income.


Does anyone have IP in Kedron? Looking for a decent one but seems like only older styles are on market within my budget.

 

[bettedavis]

Most people purchase property with borrowed funds. Even the deposit is funded from redrawing equity from other properties. You also need to consider purchase costs when buying a property as well. Therefore in reality a property costing $350k could actually cost you over $365k.

Therefore, the cashflow for the new purchase needs to be calculated on this basis.

You may need to target areas that have not seen a lot of growth in recent times.
>> Hi Sailesh. thanks for the advice. Just wondering what your reason is behind?

You may also need to stretch out your suburb criteria a bit as well. Carseldine, is a good area to investigate as well..[/QUOTE]
>> Agree. I was interested in the surburb as well but thought a bit too far. Will definitely have a look though

 

[bettedavis]

Are you sure about that? All expenses are a direct tax deduction??

From what I understand your net "paper" loss (including depreciation) is used to calculate your tax return from neg gearing. So for a total expense of $23,660 and rental income of 52 x 319 = $7,072 loss.. lets guess $5k depreciation, so a paper loss of $7,072 + $5k = $12,072
A tax return of $12,072 x 30% = $3,621
So your real loss is $7,072 - $3,621 = $3,451

You'd actually need a return closer to $400/wk (80% LVR) to be cf+

Back to the topic.. you may want to engage a BA who has his/her fingers on the pulse.. unless you want to do a lot of research/networking/searching/negotiating yourself.. Just having a quick look on re.com this Holland Park West is a 5.6% yield.

Just outside the 10km radius on the other hand...

I can be flexible. Have you used a BA? Can you please tell how cost effective is it?

Thanks

 

[redsquash]

Sorry to drag the thread back off topic but can someone please clarify the difference between redsquash and VB's calculations.. and mention which one's correct? I'm trying to get my head around it but.. fail.

VB and I are both incorrect as we didnt take into acccount the govt charges when we take out a loan. This is about another $30 plus a week on an interest only loan
You might view VB as giving you a better picture of -ve or +ve gearing , but as I indicated if you sell then the depreciation will be used again, in calculating what CGT needs to be paid . Inflation will eat at this tax amount as well.
If you are going to hold forever use VB calcs

Personally I dont think getting a positive cash flow starting now in a metropolitan region is possible unless you look for commercial and or manage it yourself. You may have done this 2 years back.COuntry regions are different.
You might do it in the very short term , but with all outgoings, repairs and vacancies over time it is going to be a rare event.
Even if you put a large deposit down,you must add in the opportunity cost involved of not having those funds in a high interest account, to strictly adhere to the meaning of positive gearing.


Take a cash flow loss for a long term capital gain that is reasonable rather than exceptional will still produce wealth and equity for future purchases IMHO.